Following tighter US sanctions and a significant drop in oil revenue, Venezuela’s government is increasing taxes and public service fees on the private sector in an attempt to alleviate some of the fiscal pressure.
According to Reuters, economists and concerned business leaders say that this policy change will make things tougher for companies already struggling in a tough economic environment.
The US had granted an exemption from some sanctions until February, allowing relevant companies such as Chevron to export Venezuelan crude oil. More secondary sanctions were directed against other purchasers of the nation’s crude.
These changes may decrease the country’s oil revenues, which were approximately $15 billion in 2024, by as much as 30%, analysts estimated.
As oil money dwindles, the Venezuelan government is increasingly turning to the private sector for cash.
Business leaders claim a frenzy of audits, heavy fines, and mandated early tax payments.
Local governments and public service providers have also been allowed to raise their fees, increasing the operational burden on enterprises.
Private sector faces intensifying pressure
In April, President Nicolas Maduro declared an economic emergency, allowing him to remove tax exemptions.
He had earlier instructed officials to increase tax revenue to $10.4 billion this year from $5.2 billion.
Tax collections rose about 20% in the January-March 2025 quarter over the January-March 2024 quarter, government data showed.
However, these initiatives also have a price. But instead of stimulating growth, the tough tax regime is stifling investment and jobs, claim business owners.
A survey published in May by the industry group Conindustria showed that 77% of businesspeople viewed taxation as their top operational hurdle.
Two-thirds of respondents reported no plans or only modest plans to ramp up production in the months ahead.
“Whatever additional tax is paid will come from working capital,” said Conindustria president Luigi Pisella, who believes that the tax base should be expanded to avoid putting pressure on current enterprises.
Medium-sized businesses are already considering layoffs, while larger organisations report a slowdown in employment creation.
Tax revenues offer a lifeline to the government
While some government officials praise the increase in tax collection, analysts see the measure as a temporary fix rather than a long-term budgetary strategy.
Economist Luis Barcenas of local consultant Ecoanalitica describes taxes as a “lifesaver” for the government, estimating that corporations might pay up to $13 billion in taxes this year, or half of their overall earnings.
Private sector representatives have met with officials to discuss adjustments, but entrepreneurs claim that their efforts have resulted in no improvements.
Meanwhile, businesses face an increasing number of fiscal demands, such as municipal levies, which have a significant impact on operational costs.
Retailers, in particular, highlight the closure of unprofitable stores. Rising taxes and service costs are also passed on to customers.
According to one merchant from central Venezuela, a major portion of every product price is currently used to meet governmental tax obligations.
Public services are no longer subsidised
The elimination of financing for critical but unreliable public services has worsened economic stress.
With fewer oil revenues to fund them, previously heavily subsidised services such as electricity and water have seen prices more than quadruple in the last year, according to the Venezuelan Finance Observatory.
Manufacturers with facilities in many municipalities confront overlapping tax regimes and frequently pay more than overseas enterprises that import completed goods or have limited local infrastructure.
According to business leaders, these disadvantages are enterprises that invest locally.
With inflation anticipated to reach 180% by the end of 2025, up from 48% in 2024, businesses must now navigate an increasingly hostile environment in which growing prices, regulatory expectations, and declining consumer spending collide.
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